Kotak Mahindra Bank: Buy, sell or hold? What should investors do after Q2 results?

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Kotak Mahindra Bank;s standalone net interest income in Q2FY22 rose 3.2 percent year-on-year to Rs 4,020.6 crore.

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Kotak Mahindra Bank share price rose in the early trade on October 27 after the company had announced its September quarter results.

Private sector lender Kotak Mahindra Bank on October 26 reported a 7 percent year-on-year decline in standalone profit at Rs 2,032 crore for the September 2021 quarter due to higher provisions.

But supported by higher other income, the profit was ahead of analysts’ estimates. However, net income sequentially grew by 24 percent on sharp decline in bad loan provisions.

Standalone net interest income in Q2FY22 rose 3.2 percent year-on-year to Rs 4,020.6 crore – meeting street expectations – with healthy 15 percent YoY (8 percent QoQ) loan growth.

Net interest margin contracted 5 bps year-on-year and 15 bps sequentially to 4.45 percent in Q2.

Asset quality improved during the quarter ended September 2021 with gross non-performing assets as a percentage of gross advances falling 40 bps QoQ to 3.2 percent and the net NPA declined 20 bps to 1.1 percent on sequential basis. 10 basis points is 0.01 percent.

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Here is what brokerages have to say about the stock and the company post September quarter earnings:

Jefferies

Research firm has kept a buy rating on the stock and raised the target price to Rs 2,560. It also raised estimates by 4-5 percent for FY22-24.

The key positive is uptick in loan growth to 15 percent YoY. The asset quality has held up with stable gross NPLs.

Morgan Stanley

Broking firm has maintained equal-weight rating and raised target to Rs 2,250 from Rs 1,900 as asset quality and loan growth surprised positively.

The core PPoP, however, missed estimates, on lower margin & high costs. It expects revenue growth to accelerate & drive 25 percent PPoP growth during F22- F24.

Goldman Sachs

Brokerage firm has maintained neutral call with a target at Rs 1,935.

It believes that the company has addressed a key concern of reviving loan growth.

It is well-positioned to gain market share. However, sustainability or further market share gain without any compromise is a key for re-rating.

At 09:23 hrs, Kotak Mahindra Bank was quoting at Rs 2,211.30, up Rs 0.75, or 0.03 percent on the BSE.

Disclaimer: The above report is compiled from information available on public platforms. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.